Rsui Indemnity Company v. the Lynd Company
466 S.W.3d 113
| Tex. | 2015Background
- Lynd Company purchased a primary property policy ($20M per occurrence) and an excess policy from RSUI ($480M per occurrence) covering >100 commercial properties; RSUI required a pre‑policy "Statement of Values" listing three scheduled items at each location (building, contents, 1 year rental income).
- Hurricane Rita damaged 15 listed properties in one "occurrence," producing combined adjusted losses ≈ $24.5M; Westchester (primary) paid $20M; RSUI paid ≈ $750K, disputing the remaining ≈ $4.2M.
- The RSUI Scheduled Limit of Liability endorsement caps RSUI’s liability as "the least of" three alternatives per "in any one 'occurrence'": (a) actual adjusted loss (less deductibles and primary limits), (b) 115% of the individually stated value for each scheduled item at the location which had the loss (less deductibles/primary), or (c) the policy Limit of Liability.
- RSUI applied the endorsement item‑by‑item (comparing a/b/c for each scheduled item/location), limiting some payments to 115% of stated values at two locations; Lynd argued the comparison must be made once for the aggregate series of losses in the single occurrence (i.e., compare totals across all damaged locations).
- The trial court adopted RSUI’s construction and entered judgment for RSUI; the court of appeals reversed for Lynd and rendered judgment; the Texas Supreme Court affirmed the court of appeals, holding the endorsement ambiguous and construing it for coverage in favor of Lynd.
Issues
| Issue | Lynd's Argument (Plaintiff) | RSUI's Argument (Defendant) | Held |
|---|---|---|---|
| 1) How to apply the Scheduled Limit endorsement: item‑by‑item vs. aggregate per occurrence | "Least of" the three alternatives applies once to the total of all losses from the single occurrence (aggregate of series of losses) | The three alternatives apply on an item‑by‑item (per scheduled item at each location) basis — i.e., compare a/b/c for each item/location | The policy language reasonably supports both constructions; the endorsement is ambiguous as to item‑by‑item vs aggregate, so ambiguity is resolved for the insured (Lynd) — aggregate application affirmed. |
| 2) Does the title/structure/use of a Statement of Values make the policy necessarily a "scheduled" (itemized) policy? | The presence of a schedule does not compel an item‑by‑item limit; language controls, not labels; RSUI used a flat premium rate across items | A "Scheduled" endorsement and requirement of a Statement of Values are hallmarks of scheduled (item‑by‑item) coverage and industry practice supports RSUI’s construction | Court: structural/industry arguments do not make Lynd’s construction unreasonable; the schedule and premium structure could be consistent with blanket or hybrid treatment; language ambiguity remains. |
| 3) Do industry decisions from other jurisdictions require rejecting Lynd’s reading? | Many cases are distinguishable; variations in form language and nonstandard endorsements limit precedential uniformity | Most other jurisdictions interpreting similar language have accepted item‑by‑item limits; Texas should follow for predictability | Court: national jurisprudence is mixed and often involves different language; those decisions don’t eliminate ambiguity here. |
| 4) If ambiguous, how to resolve ambiguity? | Ambiguities in insurance contracts are construed against the insurer and in favor of coverage | RSUI argued its construction was the only reasonable one, so no ambiguity | Court: ambiguity exists; apply rule construing ambiguities for insured — affirming court of appeals for Lynd. |
Key Cases Cited
- Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118 (Tex. 2010) (primary principles of contract interpretation govern insurance policies)
- Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507 (Tex. 2014) (use policy language to ascertain parties' intent)
- Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132 (Tex. 1994) (give words ordinary meaning; read contract in context)
- Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997) (favor uniform construction of identical insurance provisions across jurisdictions)
- Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517 (Tex. 1995) (importance of uniformity where identical policy provisions appear in multiple jurisdictions)
- Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738 (Tex. 1998) (contract ambiguous only if reasonable interpretations support multiple meanings; ambiguous insurance terms construed for the insured)
- Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455 (Tex. 1997) (if only one reasonable construction exists, adopt it; otherwise ambiguity yields insured‑favorable construction)
- Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154 (Tex. 1951) (ambiguity exists when application of interpretive rules leaves genuine uncertainty between reasonable meanings)